UPDATE 2-Swiss Re says NZ quake claims will bust 2011 budget

Wed Mar 2, 2011 5:04pm IST

Stocks

   

* Sees NZ quake claims at $800 mln

* Sees total insurance sector costs at $6-$12 billion

* Says quake 'significant event' for sector globally

* Shares down 2.1 pct, other reinsurers also lower

(Adds analyst, Swiss Re, Munich Re and Hannover Re comments, shares, details)

By Jason Rhodes

ZURICH, March 2 (Reuters) - Swiss Re RUKN.VX faces around $800 million of claims from the New Zealand earthquake, pushing it over its 2011 budget for natural catastrophes and eating into profits.

Total insurance industry claims from the quake would run to $6-$12 billion, making it a significant global event for insurers, the world's second-biggest reinsurer said on Wednesday. Early estimates had pointed to an insured loss of up to $8 billion.

Reinsurers may be able to start hiking prices if there are more natural disasters leading to high payouts this year, analysts said.

The magnitude 6.3 earthquake that struck New Zealand's South Island on Feb. 22 caused deaths and widespread damage, particularly in Christchurch. [ID:nL3E7E101P]

"The New Zealand earthquake is a big event and Swiss Re's share higher than expected," said Vontobel analyst Stefan Schuermann, adding he was cutting his 2011 earnings estimate.

The world's No.1 and No.3 players, Munich Re (MUVGn.DE) and Hannover Re (HNRGn.DE), on Wednesday said it was still too early to estimate their share of the costs.

Credit Suisse in a research note last month had estimated that, based on expected loss claims from a separate earthquake that hit New Zealand in September, Munich Re's share of damage would be higher than Swiss Re's. [ID:nLDE71M094]

Credit Suisse had calculated the share of losses at around 15.3 percent for Munich Re, 7.7 percent for Swiss Re, 3.8 percent for Hannover Re and 5.3 percent for Amlin (AML.L), but cautioned that the estimates should be seen as a frame of reference rather than guidance.

Shares in Swiss Re traded 2.1 percent lower at 1125 GMT, against a 1.8 percent drop in the European insurance sector .SXIP, a 2.9 percent fall in Munich Re and a 3.4 percent dip in the stock of Hannover Re.

Swiss Re had estimated it would have to pay out $1.01 billion on natural catastrophe claims this year assuming a normal level of events.

But the company expects the hit from the New Zealand quake together with the cost of flooding in Australia to add up to around $1.025 billion in the first quarter alone.

While this will likely hit profit, it could help to increase the prices reinsurers can charge to take on risk from insurers if there are further large claims events this year.

The industry is currently suffering from low prices because of a glut of supply.

"For 2011, it is too early to make a positive call for premium rates on the back of this year's events. However, it is clear that these large losses could set the stage for a more positive development if areas such as U.S. hurricanes and European windstorms can also produce some big events this year," said Helvea analyst Tim Dawson. A Swiss Re spokesman said: "I can't speculate on whether prices will increase," said a Swiss Re spokesman. "What we have seen in the past is that if nat cats were that high, prices could be affected."

The earthquakes in September and February may force New Zealand's government to recapitalise its national disaster safety fund, analysts and insurers have said. [ID:nN24142510] (Additional reporting by Jonathan Gould in Frankfurt; Editing by Hans Peters and Erica Billingham)

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